Chinese steel exports cross 10 million tonne mark in December

According to data released by the China’s customs, China’s steel exports jumped to a record of 93.78 million tonnes in 2014 higher by 51% over 2013

Exports climbed to 10.17 million tonnes in December, the highest monthly figure on record.

Burdened with huge overcapacity and major slowdown in domestic demand, Chinese steel mills have stepped up steel exports especially in last 4 months to 36.96 million tonnes (Monthly average of 9.24 million tonnes)Dec’14 – 10.17 million tonneNov’14 – 9.72 million tonnesOct’14 – 8.55 million tonnesSep’14 – 8.52 million tonnes

2012 – 51.2 million tonnes (Monthly average of 4.3 million tonnes)2013 – 57.2 million tonnes (Monthly average of 4.8 million tonnes)2014 – 93.8 million tonnes (Monthly average of 7.9 million tonnes)

Chinese economy and steel industry has undergone radical change over last 1 year spelling devastation for global steel mills. It has changed tact from buying driven by high growth model to modulating investment driven balancing model. Growth has plummeted to 7.3% lowest in the last 5 years and portends to be no better in Q4.

China has got 1.1 billion tonne steel capacity whereas it is projected to produce 820 million tonnes in 2014. Even at 75% capacity utilization the steel industry is left with surplus volume owing to lack of domestic demand. With near demise of property market and construction activity ebbing in China, mills are running helter skelter to liquidate volumes. Incidentally, production pruning is the last word in China owing to compelling social obligations of employment.

Domestic mills in China have diverted volumes to export with twin objective of liquidating surplus volume and quest for better realization propped by rather dubious export incentive structure. But to almost double steel exports in last 3 months over 2013 monthly average, Chinese steel mills have cut their export prices drastically. The low export prices have helped Chinese steel mills to grab major volumes from major steel importing countries across the globe.

However, Chinese government announced withdrawal of 13% VAT rebate on export of boron added Bars & Rods, Wire Rods, Rebar and medium plates blocking the well oiled mechanism to circumvent export taxes and avail VAT rebate wef January 1st 2015.

While a sense of relief prevailed among the steel mills worldwide initially, the opinions on the likely impact on Chinese steel exports in 2015 became divergent as details started to emerge. While many analysts believe that Chinese exports will fall substantially in 2015 and FOB levels would improve, especially by 20-30% in Q1 of 2015, many say that Chinese steel mills will find alternate routes like addition of chromium to maintain export levels at competitive FOB levels

But as China’s crude steel capacity will be little changed this year at 1.1 billion tonnes and mills will continue to churn despite slow down in domestic demand, Chinese steel mills are expected to pump huge surplus volumes in overseas markets.